The Swiss National Bank’s negative interest rates are “appropriate” for now though their side-effects are evidence monetary policy must eventually return to more standard instruments, President Thomas Jordan said.

“In Switzerland the negative interest rate is currently indispensable, owing to the overvaluation of the Swiss franc and the globally low level of interest rates,” he said in the text of a speech for delivery in Basel on Monday. “Nonetheless, the challenges and side-effects show clearly that we must aim for a normalization of monetary policy over time.”

Since January 2015 the SNB has pursued a two-pillar strategy of a deposit rate of minus 0.75 percent and a pledge to intervene in currency markets to counter appreciation pressure on the franc, whose real external value has been on a “gradual downward trajectory” since mid 2015, Jordan said. Still, the currency, beloved by investors as a haven at times of market stress, remained “significantly overvalued,” he said.

Banks and insurance companies have voiced concern about negative policy rates, which have weighed on investment income. The policy carries the risk of causing undesirable consequences for the financial sector, according to the SNB president.

Another possible side effect is cash hoarding, as investors try to circumvent the charge. Given that demand for cash has not risen, “the effective lower bound for interest rates has not yet been reached, but we know that it exists,” Jordan said.

According to Bloomberg’s most recent monthly survey of economists, the SNB could cut its deposit rate as low as minus 1.25 percent before cash-hoarding sets in.

“These challenges and side-effects will amplify, the longer interest rates remain low,” Jordan said, joining a call by European Central Bank President Mario Draghi for fiscal and regulatory measures to boost potential growth. “Structural measures in the major economies can create the conditions for equilibrium interest rates worldwide to rise once more. This would also allow central banks to embark on a gradual process of normalization, and the potential adverse effects of persistently low interest rates would be contained.”